---
title: "What-If Forecasting: Price Effects in Retail"
description: "Master what-if forecasting with TimeGPT for retail pricing optimization. Learn scenario analysis to predict demand changes from price adjustments using the M5 dataset. Step-by-step Python tutorial."
icon: "store"
---

## Introduction

Pricing decisions significantly impact retail demand. [TimeGPT](/introduction/about_timegpt) makes it possible to forecast product demand while incorporating price as a key factor, enabling retailers to evaluate how different pricing scenarios might affect sales. This approach offers valuable insights for strategic pricing decisions.

This tutorial demonstrates how to use TimeGPT for scenario analysis by forecasting demand under various pricing conditions. You'll learn to incorporate price data into forecasts and compare different pricing strategies to understand their impact on consumer demand.

### What You'll Learn

- How to forecast retail demand using price as an [exogenous variable](/forecasting/exogenous-variables/numeric_features)
- How to run what-if scenarios with different pricing strategies
- How to compare baseline, increased, and decreased price forecasts
- How to interpret price sensitivity in demand forecasts

## How to Forecast Sales with Pricing Scenarios

[![Open In Colab](https://colab.research.google.com/assets/colab-badge.svg)](https://colab.research.google.com/github/Nixtla/nixtla/blob/main/nbs/docs/use-cases/5_what_if_pricing_scenarios_in_retail.ipynb)

### Step 1: Import required packages

Import the packages needed for this tutorial and initialize your Nixtla client:

```python
import pandas as pd
import os

from nixtla import NixtlaClient
```

Initialize the Nixtla client:

```python
nixtla_client = NixtlaClient(
    api_key='my_api_key_provided_by_nixtla'
)
```

### Step 2: Load the M5 dataset

Let's see an example on predicting sales of products of the [M5 dataset](https://nixtlaverse.nixtla.io/datasetsforecast/m5.html). The M5 dataset contains daily product demand (sales) for 10 retail stores in the US.

First, we load the data using `datasetsforecast`. This returns:

- `Y_df`, containing the sales (`y` column), for each unique product (`unique_id` column) at every timestamp (`ds` column).
- `X_df`, containing additional relevant information for each unique product (`unique_id` column) at every timestamp (`ds` column).

```python
from datasetsforecast.m5 import M5

Y_df, X_df, S_df = M5.load(directory=os.getcwd())
Y_df.head(10)
```

| unique_id | ds | y |
|-----------|------------|-----|
| FOODS_1_001_CA_1 | 2011-01-29 | 3.0 |
| FOODS_1_001_CA_1 | 2011-01-30 | 0.0 |
| FOODS_1_001_CA_1 | 2011-01-31 | 0.0 |
| FOODS_1_001_CA_1 | 2011-02-01 | 1.0 |
| FOODS_1_001_CA_1 | 2011-02-02 | 4.0 |
| FOODS_1_001_CA_1 | 2011-02-03 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-04 | 0.0 |
| FOODS_1_001_CA_1 | 2011-02-05 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-06 | 0.0 |
| FOODS_1_001_CA_1 | 2011-02-07 | 0.0 |

For this example, we will only keep the additional relevant information from the column `sell_price`. This column shows the selling price of the product, and we expect demand to fluctuate given a different selling price.

```python
X_df = X_df[['unique_id', 'ds', 'sell_price']]
X_df.head(10)
```

| unique_id | ds | sell_price |
|-----------|------------|------------|
| FOODS_1_001_CA_1 | 2011-01-29 | 2.0 |
| FOODS_1_001_CA_1 | 2011-01-30 | 2.0 |
| FOODS_1_001_CA_1 | 2011-01-31 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-01 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-02 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-03 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-04 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-05 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-06 | 2.0 |
| FOODS_1_001_CA_1 | 2011-02-07 | 2.0 |


### Step 3: Forecast demand using price as an exogenous variable

In this example, we forecast for a single product (`FOODS_1_129_`) across all 10 stores. This product exhibits frequent price changes, making it ideal for modeling price effects on demand. Learn more about using [exogenous variables in TimeGPT](/forecasting/exogenous-variables/numeric_features).

```python
products = [
    'FOODS_1_129_CA_1', 'FOODS_1_129_CA_2', 'FOODS_1_129_CA_3', 'FOODS_1_129_CA_4',
    'FOODS_1_129_TX_1', 'FOODS_1_129_TX_2', 'FOODS_1_129_TX_3',
    'FOODS_1_129_WI_1', 'FOODS_1_129_WI_2', 'FOODS_1_129_WI_3'
]

Y_df_product = Y_df.query('unique_id in @products')
X_df_product = X_df.query('unique_id in @products')
```

Merge the sales (`y`) and price (`sell_price`) data into one DataFrame:

```python
df = Y_df_product.merge(X_df_product)
df.head(10)
```

| unique_id | ds | y | sell_price |
|-----------|------------|-----|------------|
| FOODS_1_129_CA_1 | 2011-02-01 | 1.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-02 | 0.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-03 | 0.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-04 | 0.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-05 | 1.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-06 | 0.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-07 | 0.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-08 | 0.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-09 | 0.0 | 6.22 |
| FOODS_1_129_CA_1 | 2011-02-10 | 3.0 | 6.22 |


Let's investigate how the demand, our target `y`, of these products has evolved in the last year of data. 

```python
nixtla_client.plot(df, unique_ids=products, max_insample_length=365)
```

<Frame caption="Historical retail demand showing intermittent sales patterns across 10 stores">
  ![Historical retail demand showing intermittent sales patterns across 10 stores for FOODS_1_129 product](https://raw.githubusercontent.com/Nixtla/nixtla/readme_docs/nbs/_docs/docs/use-cases/5_what_if_pricing_scenarios_in_retail_files/figure-markdown_strict/cell-15-output-1.png)
</Frame>

We see that in the California stores (with a CA_ suffix), the product has sold intermittently, whereas in the other regions (TX and WY) sales where less intermittent. Note that the plot only shows 8 (out of 10) stores.

Next, we look at the `sell_price` of these products across the entire data available.

```python
nixtla_client.plot(df, unique_ids=products, target_col='sell_price')
```

<Frame caption="Historical pricing trends showing price changes over 5 years for retail products">
  ![Historical pricing trends showing approximately 20 price changes from 2011 to 2016 for retail products](https://raw.githubusercontent.com/Nixtla/nixtla/readme_docs/nbs/_docs/docs/use-cases/5_what_if_pricing_scenarios_in_retail_files/figure-markdown_strict/cell-16-output-1.png)
</Frame>

We find that there have been relatively few price changes (about 20 in total) over the period 2011 to 2016.

Let's turn to our forecasting task. We will forecast the last 28 days in the dataset.

To use the `sell_price` exogenous variable in TimeGPT, we have to add it as future values. Therefore, we create a future values dataframe, that contains the `unique_id`, the timestamp `ds`, and `sell_price`.

```python
future_ex_vars_df = df.drop(columns = ['y'])
future_ex_vars_df = future_ex_vars_df.query("ds >= '2016-05-23'")

future_ex_vars_df.head(10)
```

| unique_id | ds | sell_price |
|-----------|------------|------------|
| FOODS_1_129_CA_1 | 2016-05-23 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-24 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-25 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-26 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-27 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-28 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-29 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-30 | 5.74 |
| FOODS_1_129_CA_1 | 2016-05-31 | 5.74 |
| FOODS_1_129_CA_1 | 2016-06-01 | 5.74 |

Next, we limit our input dataframe to all but the 28 forecast days:

```python
df_train = df.query("ds < '2016-05-23'")

df_train.tail(10)
```

| unique_id | ds | y | sell_price |
|-----------|------------|-----|------------|
| FOODS_1_129_WI_3 | 2016-05-13 | 3.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-14 | 1.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-15 | 2.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-16 | 3.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-17 | 1.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-18 | 2.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-19 | 3.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-20 | 1.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-21 | 0.0 | 7.23 |
| FOODS_1_129_WI_3 | 2016-05-22 | 0.0 | 7.23 |

Now, we can generate forecasts using TimeGPT (28 days ahead):

```python
timegpt_fcst_df = nixtla_client.forecast(
    df=df_train,
    X_df=future_ex_vars_df,
    h=28
)
timegpt_fcst_df.head()
```

| unique_id | ds | TimeGPT |
|-----------|------------|------------|
| FOODS_1_129_CA_1 | 2016-05-23 | 0.875594 |
| FOODS_1_129_CA_1 | 2016-05-24 | 0.777731 |
| FOODS_1_129_CA_1 | 2016-05-25 | 0.786871 |
| FOODS_1_129_CA_1 | 2016-05-26 | 0.828223 |
| FOODS_1_129_CA_1 | 2016-05-27 | 0.791228 |

We plot the forecast, the actuals and the last 28 days before the forecast period:

```python
nixtla_client.plot(
    df[['unique_id', 'ds', 'y']],
    timegpt_fcst_df,
    max_insample_length=56
)
```

<Frame caption="TimeGPT baseline forecast with 28-day ahead predictions for retail demand">
  ![TimeGPT baseline forecast showing actual demand and 28-day ahead predictions for retail products](https://raw.githubusercontent.com/Nixtla/nixtla/readme_docs/nbs/_docs/docs/use-cases/5_what_if_pricing_scenarios_in_retail_files/figure-markdown_strict/cell-20-output-1.png)
</Frame>

### Step 4: What-If Scenario Forecasting with Price Changes

What happens when we change the price of the products in our forecast period? Let's see how our forecast changes when we increase and decrease the `sell_price` by 5%.

```python
price_change = 0.05

future_ex_vars_df_plus = future_ex_vars_df.copy()
future_ex_vars_df_plus["sell_price"] *= (1 + price_change)

future_ex_vars_df_minus = future_ex_vars_df.copy()
future_ex_vars_df_minus["sell_price"] *= (1 - price_change)
```

Let's create a new set of forecasts with TimeGPT.

```python
timegpt_fcst_df_plus = nixtla_client.forecast(df_train, future_ex_vars_df_plus, h=28)
timegpt_fcst_df_minus = nixtla_client.forecast(df_train, future_ex_vars_df_minus, h=28)
```

Rename and combine the scenario forecasts:

```python
timegpt_fcst_df_plus = timegpt_fcst_df_plus.rename(columns={'TimeGPT':f'TimeGPT-sell_price_plus_{price_change * 100:.0f}%'})
timegpt_fcst_df_minus = timegpt_fcst_df_minus.rename(columns={'TimeGPT':f'TimeGPT-sell_price_minus_{price_change * 100:.0f}%'})

timegpt_fcst_df = pd.concat([timegpt_fcst_df, 
                             timegpt_fcst_df_plus[f'TimeGPT-sell_price_plus_{price_change * 100:.0f}%'], 
                             timegpt_fcst_df_minus[f'TimeGPT-sell_price_minus_{price_change * 100:.0f}%']], axis=1)

timegpt_fcst_df.head(10)
```

| unique_id | ds | TimeGPT | TimeGPT-sell_price_plus_5% | TimeGPT-sell_price_minus_5% |
|-----------|------------|------------|------------|------------|
| FOODS_1_129_CA_1 | 2016-05-23 | 0.875594 | 0.847006 | 1.370029 |
| FOODS_1_129_CA_1 | 2016-05-24 | 0.777731 | 0.749142 | 1.272166 |
| FOODS_1_129_CA_1 | 2016-05-25 | 0.786871 | 0.758283 | 1.281306 |
| FOODS_1_129_CA_1 | 2016-05-26 | 0.828223 | 0.799635 | 1.322658 |
| FOODS_1_129_CA_1 | 2016-05-27 | 0.791228 | 0.762640 | 1.285663 |
| FOODS_1_129_CA_1 | 2016-05-28 | 0.819133 | 0.790545 | 1.313568 |
| FOODS_1_129_CA_1 | 2016-05-29 | 0.839992 | 0.811404 | 1.334427 |
| FOODS_1_129_CA_1 | 2016-05-30 | 0.843070 | 0.814481 | 1.337505 |
| FOODS_1_129_CA_1 | 2016-05-31 | 0.833089 | 0.804500 | 1.327524 |
| FOODS_1_129_CA_1 | 2016-06-01 | 0.855032 | 0.826443 | 1.349467 |

As expected, demand increases when we reduce the price and decreases when we increase it. A cheaper product leads to higher sales and vice versa. 

Finally, let's plot the forecasts for our different pricing scenarios, showing how TimeGPT forecasts a different demand when the price of a set of products is changed.

```python
nixtla_client.plot(
    df[['unique_id', 'ds', 'y']],
    timegpt_fcst_df,
    max_insample_length=56
)
```

<Frame caption="What-if scenario comparison showing demand forecasts under different pricing strategies">
  ![What-if scenario comparison: baseline, +5% price increase, and -5% price decrease demand forecasts](https://raw.githubusercontent.com/Nixtla/nixtla/readme_docs/nbs/_docs/docs/use-cases/5_what_if_pricing_scenarios_in_retail_files/figure-markdown_strict/cell-24-output-1.png)
</Frame>

In the graphs we can see that for specific products for certain periods the discount increases expected demand, while during other periods and for other products, price change has a smaller effect on total demand.

## Conclusion

What-if forecasting with TimeGPT enables data-driven pricing decisions by:
- Modeling demand sensitivity to price changes
- Comparing multiple pricing scenarios simultaneously
- Incorporating exogenous variables for realistic predictions

This scenario analysis approach helps retailers optimize pricing strategies and maximize revenue while understanding demand elasticity.

### Next Steps

- Explore [intermittent demand forecasting](/use_cases/forecasting_intermittent_demand) with TimeGPT
- Learn about [fine-tuning models](/forecasting/fine-tuning/steps) for better accuracy
- Understand [cross-validation](/forecasting/evaluation/cross_validation) for model evaluation
- Scale forecasts with [distributed computing](/forecasting/forecasting-at-scale/computing_at_scale)

### Important Considerations

- This method assumes that historical demand and price behaviour is predictive of future demand, and omits other factors affecting demand. To include these other factors, use additional exogenous variables that provide the model with more context about the factors influencing demand.
- This method is sensitive to unmodelled events that affect the demand, such as sudden market shifts. To include those, use additional exogenous variables indicating such sudden shifts if they have been observed in the past too.